Last month, the Securities and Exchange Commission proposed rules to implement Section 926 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Section 926 requires the SEC to adopt rules that disqualify securities offerings involving certain felons and other “bad actors” from reliance on the safe harbor for exemption from registration under the Securities Act of 1933 provided by Rule 506 of Regulation D. Following the adoption of final SEC rules, a significantly greater number of exempt securities offerings will be subject to bad actor disqualification requirements, increasing the diligence burden on issuers with respect to possible disqualifying events and potentially affecting their ability to raise capital without registration. The SEC is soliciting comments on the proposed bad actor disqualification rules through July 14, 2011. This client alert summarizes certain key aspects of the proposed rules.